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Faced with overabundance crisis, the government on Thursday decided to pump out its urea fertiliser stocks with a 27 per cent price cut to recoup some of the agricultural loss of the last fiscal year.
The decision was taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Finance Minister Ishaq Dar. The committee also approved introduction of better quality petrol in the market by October.
The ECC allowed the sale of imported fertiliser currently available with National Fertiliser Marketing Limited (NFML) at Rs1,310 per 50-kilogram bag instead of its existing average price of Rs1,786. This will cost the government an amount of Rs2.6 billion.
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The meeting was informed that the Trading Corporation of Pakistan (TCP) imported 344,000 tonnes of urea during the last fiscal year. However, only 67,000 tonnes could be offloaded. The NFML was incurring a maintenance cost of Rs3.5 million per month, or Rs21 per bag.
Federal Minister for National Food Security and Research Sikandar Hayat Bosan proposed that farmers should be given an incentive to purchase NFML’s surplus urea to minimise carrying cost. Participants questioned the rationale behind importing such huge quantities in the first place and wanted an investigation.
It was explained that higher imports were based on previous year’s import of 150,000 tonnes by the public sector but the main cotton crop faced a 29pc loss because of crop diversions, higher fertiliser prices and other factors and farmers did not utilise the expected fertiliser quantities.
It was also explained that the NFML used to maintain a 200,000 tonnes of buffer stock to play with domestic urea prices, but the private sector also imported much larger quantities (about 170,000 tonnes) because of declining international prices.
This created a glut and there was no more reason for a buffer stock given the fact the stocks already available in the market were enough coupled with domestic produce to meet crop requirements for two to three years.
Therefore, a cost analysis exercise was carried out which indicated the carrying cost would be greater than selling the commodity with a cut of Rs476 per bag. It was also warned that carrying on with the stocks would cost about Rs5.6bn because the government would have to provide subsidy even next year.